Economic and environmental potential of medium-scale combined heat and power (CHP) systems in the residential sector was assessed by introducing a 400 kWerscale phosphoric acid fuel cell (PAFC)-based CHP system into an apartment building in New York City. Simulation-based analyses were carried out under two different CHP operation strategies; electrical-load-following (ELF) and thermal-load-following (TLF). Technical and economic analyses indicated that ELF would be the appropriate operation mode for this CHP application. Economic analysis indicated that the CHP/ELF system operation could economically benefit users within 10 years under the present grid prices in New York City. However, because the CO2 emission factor of the NY grid is very low (300 g/kWh), the CHP/ELF system operation would increase CO2 emission. Achieving carbon neutrality in this application thus requires improvement in the utilization ratio of recovered heat. (C) 2017 Hydrogen Energy Publications LLC. Published by Elsevier Ltd. All rights reserved.